The Obama administration on Friday said it is on track to set up federal health insurance exchanges by 2014 in U.S. states that fail to establish their own regulated insurance markets under the U.S. healthcare reform law.

The Health and Human Services Department is also preparing to issue new guidance for states before the end of the summer on how federally facilitated exchanges are expected to operate, a senior official said.

“We realize that not all states will be ready to establish these exchanges by 2014, so we are on track to set up the federally facilitated exchange in those states. It is on track to go live,” said Mike Hash, the senior official overseeing the administration’s health exchange effort at HHS.

His remarks come at a time of mounting tension between the administration and some states over the exchanges and other provisions of President Barack Obama’s healthcare reforms.

The reform law known as the Patient Protection and Affordable Care Act calls on states to create regulated exchanges where an estimated 16 million uninsured Americans are expected to qualify for private health coverage at rates subsidized according to income via federal tax credits.

Tax credits would be available for a family of four earning up to $88,000 a year.

The Affordable Care Act survived a major legal test a month ago when the U.S. Supreme Court upheld the law as constitutional but allowed states to opt out of an expansion of the Medicaid program for the poor.

But the reform provision on exchanges has since become an election year flashpoint for several Republican governors who reject the plan, along with the Medicaid expansion, as too costly and bureaucratic.

Officials in still more states are waiting to see who wins the November election before taking action.

Republicans, led by their party’s presumptive presidential nominee, Mitt Romney, are vowing to repeal “Obamacare” if they win big in November’s general election.

State resistance to the exchanges, spearheaded by the governors of Florida, South Carolina, Louisiana, Mississippi and Texas, has been largely overshadowed up to now by the concurrent fight over Medicaid, which would extend coverage to an estimated 11 million people who are now uninsured.

MISSING THE BOAT?

Speaking at a Capitol Hill conference on health reform, Hash said the administration wants as many states as possible to set up their own exchanges but has begun testing a federal exchange model that can be rolled out “in any number of states.”

HHS is scheduled to host a series of meetings across the country to discuss reform issues with state representatives and others. It has scheduled forums in the District of Columbia, Atlanta, Chicago and Denver from August 14-22.

Thirty-five states have accepted a total of $850 million in federal grants to plan and establish state exchanges. But only 13 and the District of Columbia have declared their intention to establish their own marketplaces.

According to the Commonwealth Fund, a private foundation that promotes healthcare system improvements, 24 states have taken no action toward establishing an exchange while eight others have declared that they will not pursue one.

The administration has set a November 16 deadline for states to say whether they intend to set up their own exchange, create one in partnership with the federal government or let federal officials establish one for their residents.

Initial enrollment is due to begin nationwide in October 2013, three months before the Affordable Care Act’s provisions come into full force on Jan 1, 2014.

The National Association of Insurance Commissioners, which represents insurance regulators in all 50 states, says state governments that opt for federal exchanges risk losing control of lucrative private health insurance markets within their borders.

“If the states do not get ready for this, then they lose the ability to regulate. It’s the whole marketplace,” Brian Webb, NAIC’s health policy and legislation manager, told the forum hosted by the nonpartisan Alliance for Health Reform.

“They may get their wish and not be able to do anything in their marketplaces,” he said. “There’s not an insurance commissioner in the country who wants to say, ‘No, we’re not going to regulate that.'”

Tim Jost, a health law expert at Washington and Lee University, warned the same audience that inactive states may already have “missed the boat” for establishing their own exchanges on schedule.

“If you work backwards from October (2013), you get almost to the present,” said Jost, who believes most states will wind up with federal exchanges in 2014 then transition to their own operations over time.

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